Post-Independence Consolidation — UPSC Modern History Notes

1. From Accession to Merger

Two-stage process: Instruments of Accession (1947) ceded only defence, external affairs and communications; the second stage, led by Sardar Patel and V.P. Menon, merged the states fully through Merger Agreements (1948–49).

Three routes: Small states merged into adjoining provinces (e.g. Orissa and Chhattisgarh states); some became centrally administered units (e.g. Himachal Pradesh, Tripura, Manipur); others were grouped into unions such as Saurashtra, Madhya Bharat, PEPSU, Rajasthan and Travancore-Cochin.

Constitutional status (1950): The unions and large states (Hyderabad, Mysore, Jammu and Kashmir) became Part B states headed by a Rajpramukh; several small units became Part C states. The 7th Amendment (1956) ended this classification.

2. Ending Princely Privileges

Privy purses: In return for merger, rulers were guaranteed tax-free annual payments and personal privileges (Articles 291 and 362).

Abolition: A 1970 amendment bill failed in the Rajya Sabha; the President's order 'derecognising' the rulers was struck down by the Supreme Court in the Privy Purses case (Madhav Rao Scindia v. Union of India, 1970); the 26th Amendment (1971) finally abolished privy purses and privileges.

3. The French Settlements

Chandernagore: Voted to join India in a 1949 plebiscite; de facto transfer in 1950, treaty of cession in 1951, merged with West Bengal in 1954.

Pondicherry, Karaikal, Mahe and Yanam: After local agitation and a vote of elected representatives (Kizhoor, October 1954), France handed over administration on 1 November 1954 (de facto). The treaty of cession (1956) was ratified by France in 1962; de jure transfer on 16 August 1962, and the 14th Amendment (1962) made Puducherry a Union Territory.

Method: Negotiation and diplomacy, keeping Indo-French relations cordial.

4. The Portuguese Enclaves

Portuguese refusal: Salazar's dictatorship called Goa an 'overseas province' of Portugal and refused talks; India closed its legation in Lisbon (1953).

Dadra and Nagar Haveli: Freed by nationalist volunteers in 1954; formally merged with India by the 10th Amendment (1961). In the Right of Passage case (1960), the ICJ held that Portugal had no right of passage for armed forces across Indian territory.

Goa satyagraha (1955): Unarmed satyagrahis from across India marched in; many were fired upon on 15 August 1955.

Operation Vijay (18–19 December 1961): After years of failed diplomacy, the Indian armed forces liberated Goa, Daman and Diu in about 36 hours; the 12th Amendment (1962) made them a Union Territory. Goa became a full state in 1987.

5. Sikkim

Protectorate: Under the 1950 Indo-Sikkim Treaty, India handled Sikkim's defence, external affairs and communications; the Chogyal (king) ruled internally.

Democratic movement: Popular agitation against the Chogyal (1973) led to elections (1974) and the Government of Sikkim Act, 1974; the 35th Amendment (1974) made Sikkim an 'associate state'.

Statehood: A referendum in April 1975 voted to abolish the monarchy; the 36th Amendment (1975) made Sikkim the 22nd state of India, with special provisions under Article 371F.

Practice

UPSC-style (Mains): 'The integration of princely states was a political achievement, but completing India's territorial unity took another three decades.' Discuss with examples.

1. Roots of Planning

National Planning Committee (1938): Set up by the Congress under Subhas Chandra Bose's presidency, with Nehru as chairman.

Alternative plans (1944–45): The Bombay Plan of leading industrialists (J.R.D. Tata, G.D. Birla and others) accepted a strong state role; the Gandhian Plan (S.N. Agarwal) stressed village industries; the People's Plan (M.N. Roy) was socialist.

Nationalist economic critique: Drain theory and de-industrialisation convinced leaders that the state must lead industrialisation.

2. Institutions and Policy Framework

Industrial Policy Resolution, 1948: Mixed economy with defined state and private sectors.

Planning Commission (March 1950): Created by a cabinet resolution (an extra-constitutional body) with the Prime Minister as chairman; the National Development Council (1952) brought in the states.

Industries (Development and Regulation) Act, 1951: Licensing of private industry.

'Socialistic pattern of society': Adopted at the Avadi session of the Congress (1955).

Industrial Policy Resolution, 1956: Schedule A industries (17) reserved for the state, Schedule B (12) open to both with the state taking the lead, the rest left to private enterprise.

3. The Plans

First Plan (1951–56): Based on the Harrod–Domar model; priority to agriculture, irrigation and power (Bhakra-Nangal, Damodar Valley); growth exceeded its target.

Second Plan (1956–61): The Mahalanobis model—investment in capital goods (steel, machines, power) to raise long-run growth; public sector steel plants at Bhilai (USSR), Rourkela (West Germany) and Durgapur (Britain); foreign exchange crisis in 1957–58.

Third Plan (1961–66): Aimed at self-sustaining growth, but the 1962 and 1965 wars and the droughts of 1965–66 derailed it; three Annual Plans (1966–69) followed ('plan holiday').

4. Achievements

Built a base in steel, machinery, power, heavy chemicals and atomic energy; institutions such as the IITs and national laboratories; reduced dependence on imported capital goods.

Expanded infrastructure, irrigation and public investment in a capital-scarce economy.

5. Criticism

Under-investment in agriculture and wage goods led to food shortages and dependence on PL-480 imports in the 1960s.

The licence-permit-quota system bred inefficiency, delays and rent-seeking; loss-making public enterprises; slow growth of around 3.5% a year (the 'Hindu rate of growth', a phrase of economist Raj Krishna).

Capital-intensive industry created few jobs; the Vakil–Brahmananda 'wage goods' model argued for priority to food and consumer goods.

6. Legacy

Planning was diluted after the 1991 reforms; the Planning Commission was replaced by NITI Aayog on 1 January 2015, ending five-year plans after the Twelfth Plan (2012–17).

Practice

UPSC-style (Mains): Evaluate the Mahalanobis strategy of industrialisation. Was the neglect of agriculture an inevitable cost of building heavy industry?

1. Why Land Reform?

Colonial land settlements had created a parasitic class of zamindars, insecure tenants, rack-renting and landless labour; the Congress Agrarian Reforms Committee (J.C. Kumarappa, 1949) recommended 'land to the tiller'.

Goals: social justice, higher productivity through owner-cultivation, and breaking the political power of landlords.

2. Abolition of Intermediaries

States passed zamindari abolition laws in the early 1950s (Uttar Pradesh, Bihar, Madras and others), with compensation to the zamindars.

Courts struck down some laws (e.g. Bihar's, in the Kameshwar Singh case), so the First Amendment (1951) added Articles 31A and 31B and the Ninth Schedule to shield land laws from challenge; the Fourth Amendment (1955) further protected them.

Result: Intermediaries were largely abolished by the end of the 1950s, but zamindars kept large 'home farms' (khud-kasht) by claiming personal cultivation and evicted tenants.

3. Tenancy Reforms

Aims: security of tenure, fair rent (the Plans suggested about one-fourth to one-fifth of produce) and ownership rights for tenants.

Weakness: oral leases, 'voluntary surrenders' and large-scale evictions before the laws came into force.

Kerala (Land Reforms Amendment Act, 1969) conferred ownership on tenants; West Bengal's Operation Barga (1978) registered sharecroppers (bargadars) and gave them security.

4. Land Ceilings

The Nagpur Congress session (1959) backed ceilings and cooperative farming; ceiling laws came in most states by the early 1960s, and national guidelines were revised in 1972 with lower limits.

Large exemptions, high limits, benami and fictitious transfers meant that only a small area was declared surplus and distributed.

5. Bhoodan and Gramdan

Bhoodan: Begun by Vinoba Bhave at Pochampalli (Nalgonda, Telangana) on 18 April 1951, when a landlord offered 100 acres for the landless; Vinoba walked across India asking landowners to donate a share of their land.

Gramdan: From 1952, whole villages pledged their land to the village community; it spread especially in Odisha and Bihar.

Support: Jayaprakash Narayan dedicated his life to it (Jeevandan, 1954); the Sarva Seva Sangh organised the work.

Limits: Over four million acres were pledged, but much was uncultivable or disputed and only part was distributed; the movement faded by the late 1960s, though it showed a non-violent, Gandhian path to redistribution.

6. Assessment

Land reform ended feudal intermediaries and strengthened a class of owner-cultivator 'middle peasants', who later drove the Green Revolution and farmer politics; but the landless, Dalits and women gained little.

Today's issues—land records digitisation, tenancy legalisation (Model Agricultural Land Leasing Act, 2016) and land for the landless—continue this agenda.

Practice

UPSC-style (Mains): 'Land reforms in India succeeded in abolishing zamindari but failed in redistributing land.' Critically examine.

1. Three Approaches Debated

Isolation: Associated with Verrier Elwin's early work among the Baigas (1939), which suggested protected areas to save tribals from exploitation by outsiders—criticised as a 'museum' or 'national park' approach.

Assimilation: Sociologist G.S. Ghurye described tribals as 'backward Hindus' to be absorbed into the mainstream.

Integration: Nehru's middle path—development and participation in national life while preserving tribal identity, culture and control over resources.

2. Nehru's Tribal Panchsheel

Stated in his foreword to Elwin's A Philosophy for NEFA (1957; 2nd edition 1959):

(i) People should develop along the lines of their own genius; nothing should be imposed on them, and their traditional arts and culture should be encouraged.

(ii) Tribal rights in land and forests should be respected.

(iii) A team of their own people should be trained for administration and development; outsiders should be few.

(iv) Tribal areas should not be over-administered; work should be done through their own social and cultural institutions.

(v) Results should be judged not by statistics or money spent but by the quality of human character that is evolved.

3. Verrier Elwin

British-born anthropologist who lived among the Gonds and Baigas of central India, became an Indian citizen in 1954 and served as Adviser for Tribal Affairs in NEFA (now Arunachal Pradesh); his ideas shaped Nehru's 'NEFA approach'.

4. Constitutional and Legal Safeguards

Fifth Schedule: Scheduled Areas and Tribes Advisory Councils in central and western India; Governor's power to modify laws in these areas.

Sixth Schedule: Autonomous District Councils in Assam, Meghalaya, Tripura and Mizoram.

Other provisions: Article 46 (promotion of educational and economic interests), reservation in legislatures and jobs, grants under Article 275(1), and the National Commission for Scheduled Tribes (Article 338A, 89th Amendment, 2003).

Later milestones: Dhebar Commission (1960–61); Tribal Sub-Plan from the Fifth Plan (1974); Ministry of Tribal Affairs (1999); PESA Act, 1996 (Bhuria Committee) giving gram sabhas power over resources; Forest Rights Act, 2006 recognising individual and community forest rights.

5. Problems in Practice

Land alienation, displacement by dams, mines and industry, loss of forest access, indebtedness and poor implementation of PESA; these grievances fed tribal movements and Left-Wing Extremism in central India.

The tension between national development and tribal autonomy remains unresolved, as seen in debates over mining in Scheduled Areas.

Practice

UPSC-style (Mains): Discuss the relevance of Nehru's Tribal Panchsheel in the context of present-day tribal displacement and forest rights.

1. Background

Gandhi saw the self-sufficient village republic as the basis of swaraj; the Constituent Assembly, influenced by Ambedkar's scepticism about the village, placed panchayats only in the Directive Principles (Article 40).

Community Development Programme (2 October 1952) and the National Extension Service (1953) sought rural development through block-level officials, but people's participation remained weak.

2. Balwant Rai Mehta Committee (1957)

Recommended democratic decentralisation: a three-tier system—gram panchayat (village), panchayat samiti (block) and zila parishad (district)—with the panchayat samiti as the key executive body and the zila parishad as an advisory, coordinating body chaired by the Collector.

Accepted by the National Development Council in 1958; Rajasthan was the first state (Nagaur, 2 October 1959), followed by Andhra Pradesh.

3. Decline (mid-1960s–1980s)

Elections were postponed, bodies superseded, funds and powers withheld by state governments and bureaucracy; local elites captured institutions.

4. Reform Committees

Ashok Mehta Committee (1977–78): Two-tier system (zila parishad and mandal panchayat), official participation of political parties, compulsory taxation powers.

G.V.K. Rao Committee (1985): The district should be the basic unit of planning; called the bureaucratisation of rural development 'grass without roots'.

L.M. Singhvi Committee (1986): Recommended constitutional recognition of panchayats and nyaya panchayats.

64th Amendment Bill (1989): Introduced by the Rajiv Gandhi government; passed by the Lok Sabha but defeated in the Rajya Sabha.

5. The 73rd Amendment (1992)

Added Part IX (Articles 243 to 243-O) and the Eleventh Schedule (29 subjects); came into force on 24 April 1993, now National Panchayati Raj Day.

Key features: Gram sabha; three tiers (intermediate tier optional for states with population under 20 lakh); five-year term with elections within six months of dissolution; reservation for SCs and STs in proportion to population and not less than one-third for women (many states now provide 50%); State Election Commission and State Finance Commission every five years.

Allied laws: 74th Amendment for urban local bodies (Part IXA, 12th Schedule); PESA Act, 1996 extended panchayats to Fifth Schedule areas.

6. Continuing Challenges

The '3 Fs'—funds, functions and functionaries—are devolved unevenly; dependence on grants; proxy representation of elected women ('sarpanch-pati'); parallel bodies and weak gram sabhas.

Practice

UPSC-style (Mains): 'The 73rd Amendment gave panchayats constitutional status but not real power.' Examine with reference to the 3 Fs.

1. Distinctive Features

Ethnic and linguistic diversity, hill–plain divide, international borders with China, Myanmar, Bangladesh and Bhutan, limited contact with the national movement and partition's disruption of trade routes.

In 1947 most of the region lay within a large Assam province, alongside the princely states of Manipur and Tripura.

2. The Naga Question

The Naga National Council under A.Z. Phizo declared independence (14 August 1947) and boycotted the 1952 elections; armed insurgency followed in the mid-1950s.

AFSPA (1958) was enacted to deal with the insurgency.

Moderate Nagas (Naga People's Convention) signed the 16-Point Agreement (1960); Nagaland became a state on 1 December 1963 with special protection under Article 371A.

Shillong Accord (1975) with a section of the underground; the NSCN (1980) rejected it. Ceasefire with NSCN (I-M) in 1997 and a Framework Agreement in 2015; a final settlement remains pending.

3. Mizoram

The mautam famine (1959) and the government's poor response led to the Mizo National Front (Laldenga) uprising of 1966.

Mizo Hills became a Union Territory in 1972; the Mizo Peace Accord (30 June 1986) brought the MNF into the mainstream, and Mizoram became a state in 1987 (Article 371G)—often cited as India's most successful peace accord.

4. Reorganisation of the Region

Meghalaya became an autonomous state within Assam (1970) after the hill leaders' movement; the North-Eastern Areas (Reorganisation) Act, 1971 made Meghalaya, Manipur and Tripura full states (21 January 1972) and Mizoram and Arunachal Pradesh UTs; Arunachal Pradesh became a state in 1987.

The North Eastern Council (under a 1971 Act) was set up for regional planning; a separate Ministry of DoNER followed later.

5. The Assam Movement and Accord

Assam Movement (1979–85) led by the All Assam Students' Union (AASU) against illegal migration from Bangladesh and the inclusion of migrants in electoral rolls.

Assam Accord (15 August 1985): Foreigners who came after 25 March 1971 to be detected and expelled; Clause 6 promised safeguards for the Assamese people; the Asom Gana Parishad won the 1985 elections.

The IMDT Act, 1983, applicable only to Assam, was struck down by the Supreme Court in 2005 (Sarbananda Sonowal case); the updating of the National Register of Citizens in Assam flowed from the Accord's cut-off date.

6. Other Accords

Tripura: Accord with the Tripura National Volunteers (1988). Bodo: Accords of 1993 (Bodoland Autonomous Council), 2003 (Bodoland Territorial Council under the Sixth Schedule) and January 2020 (Bodoland Territorial Region).

Practice

UPSC-style (Mains): 'Political accommodation rather than military force has been the key to peace in the North-East.' Evaluate with examples.

1. Punjabi Suba

The Akali Dal (Master Tara Singh, later Sant Fateh Singh) demanded a Punjabi-speaking state; the SRC (1955) had rejected it, fearing a religious basis.

Punjab Reorganisation Act, 1966: Created Punjab and Haryana, transferred hill areas to Himachal Pradesh and made Chandigarh a Union Territory and shared capital—leaving disputes over Chandigarh and river waters.

2. Anandpur Sahib Resolution (1973)

Adopted by the Akali Dal at Anandpur Sahib; demanded that the Centre's powers be limited to defence, foreign affairs, currency, communications and railways, with residual powers to states.

Also sought Chandigarh for Punjab, a larger share of river waters and protection of Sikh identity; its supporters saw it as federalism, critics as separatist in tone.

3. Rise of Militancy

Green Revolution prosperity was uneven; educated rural youth faced unemployment; factional politics between the Congress and the Akalis.

Jarnail Singh Bhindranwale, a religious preacher, rose to prominence; the Dharam Yudh Morcha (1982) launched by the Akalis drew him in, and armed militants fortified the Golden Temple complex, including the Akal Takht.

Killings and communal tension led to President's Rule in Punjab (October 1983).

4. Operation Blue Star (June 1984)

The army entered the Golden Temple, Amritsar to flush out militants; Bhindranwale was killed; the Akal Takht was badly damaged and many civilians and soldiers died.

It deeply hurt Sikh sentiment; on 31 October 1984 Indira Gandhi was assassinated by her Sikh bodyguards, followed by the anti-Sikh riots in Delhi and elsewhere, investigated later by several commissions, including the Nanavati Commission.

5. The Punjab Accord (24 July 1985)

Signed by Rajiv Gandhi and Sant Harchand Singh Longowal: Chandigarh to be transferred to Punjab, river water claims to be settled by a tribunal (Eradi Tribunal), the Anandpur Sahib Resolution's Centre–state issues referred to the Sarkaria Commission, and relief for riot victims.

Longowal was assassinated in August 1985; the Akali government of Surjit Singh Barnala could not contain militancy, and Chandigarh was never transferred.

6. End of Militancy

Operation Black Thunder (1986, 1988) cleared militants from the Golden Temple without major damage; President's Rule (1987–92).

After the 1992 elections, the Beant Singh government and police chief K.P.S. Gill crushed militancy by 1993; popular fatigue with violence was decisive.

7. Lessons

Mixing religion and politics, using extremists for partisan gain and delaying settlement of genuine grievances can turn regional demands into secessionism.

Practice

UPSC-style (Mains): Analyse the causes of the Punjab crisis of the 1980s. What lessons does it offer for handling regional demands?

1. Background

Indira Gandhi's landslide in 1971 ('Garibi Hatao') and victory in the Bangladesh war were followed by drought, the 1973 oil price shock, high inflation, unemployment and allegations of corruption.

Conflict with the judiciary: supersession of three senior judges in appointing the Chief Justice (1973) after the Kesavananda Bharati judgment.

2. Popular Movements

Navnirman Andolan, Gujarat (1974): Student protests against price rise and corruption forced the state government to resign.

Bihar movement (1974): Students invited Jayaprakash Narayan (JP) to lead; on 5 June 1974 at Patna he called for 'Sampoorna Kranti' (Total Revolution)—social, economic, political, cultural, educational and moral transformation.

The railway strike of May 1974, led by George Fernandes, was crushed by the government.

3. The Trigger

12 June 1975: In the case filed by Raj Narain, Justice Jagmohanlal Sinha of the Allahabad High Court set aside Indira Gandhi's 1971 election for electoral malpractice.

The Supreme Court granted only a conditional stay (24 June 1975); the opposition planned a nationwide satyagraha, and JP appealed to the police and army not to obey 'illegal' orders.

25 June 1975: President Fakhruddin Ali Ahmed proclaimed an Emergency under Article 352 on the ground of 'internal disturbance'.

4. During the Emergency

Mass arrests of opposition leaders under MISA; press censorship; fundamental rights suspended; organisations such as the RSS and Jamaat-e-Islami banned.

Government's Twenty-Point Programme; Sanjay Gandhi's drives for forced sterilisation and slum demolition (Turkman Gate, Delhi, 1976).

ADM Jabalpur v. Shivkant Shukla (1976): The Supreme Court held that detention could not be challenged by habeas corpus during the Emergency; Justice H.R. Khanna dissented.

Amendments: 39th (1975) placed the election of the PM and Speaker beyond the courts; 42nd (1976)—'mini-Constitution'—added 'socialist', 'secular' and 'integrity' to the Preamble, Fundamental Duties, and curbed judicial review.

5. End of the Emergency

Elections were announced in January 1977; the Congress was routed in the north; the Janata Party formed the first non-Congress government at the Centre under Morarji Desai (March 1977).

The Shah Commission inquired into Emergency excesses; the 44th Amendment (1978) replaced 'internal disturbance' with 'armed rebellion', required written Cabinet advice, protected Articles 20 and 21 even during Emergency, and removed the right to property from Fundamental Rights.

6. Significance

The Emergency was a test of Indian democracy: its peaceful end through elections showed the strength of democratic values; it strengthened civil liberties groups (PUCL), judicial activism and public interest litigation.

Practice

UPSC-style (Mains): 'The Emergency was both a crisis of Indian democracy and a proof of its resilience.' Discuss.

1. End of One-Party Dominance

Political scientist Rajni Kothari called the first two decades the 'Congress system'—one dominant party that accommodated factions and interests.

1967 elections: The Congress lost power in several states; Samyukta Vidhayak Dal coalition governments were formed; frequent defections ('Aaya Ram, Gaya Ram', from a Haryana MLA's party-switching in 1967).

Congress split (1969) into Congress (O) and Congress (R) over the presidential election.

2. Regional Movements and Parties

Dravidian movement: Anti-Brahmin and anti-Hindi roots; the DMK under C.N. Annadurai defeated the Congress in Madras in 1967; Dravidian parties have governed the state ever since, and it was renamed Tamil Nadu (1969).

Shiv Sena (1966): 'Sons of the soil' politics in Maharashtra.

Telugu Desam Party (1982): Founded by N.T. Rama Rao on Telugu self-respect; won Andhra Pradesh in 1983.

Asom Gana Parishad (1985): Emerged from the Assam Movement.

New states: Jharkhand, Chhattisgarh and Uttarakhand (2000) and Telangana (2014) after long movements for regional identity and development.

Federal response: The Sarkaria Commission (1983–88) on Centre–state relations; the S.R. Bommai case (1994) restricted misuse of Article 356.

3. Coalition Governments at the Centre

Janata Party (1977–79): Morarji Desai, then Charan Singh; collapsed due to internal rivalries.

National Front (1989–90): V.P. Singh, supported from outside by the BJP and the Left; implemented the Mandal Commission report (27% reservation for OBCs in central jobs, August 1990); fell after the BJP withdrew support during L.K. Advani's Rath Yatra.

Chandra Shekhar (1990–91), then P.V. Narasimha Rao (1991–96), a minority Congress government that launched economic reforms.

United Front (1996–98): H.D. Deve Gowda and I.K. Gujral, backed by the Congress from outside.

NDA (1998–2004): Atal Bihari Vajpayee—a stable multi-party coalition with a common agenda; UPA (2004–14) under Manmohan Singh followed.

4. Mandal and Mandir

Indra Sawhney case (1992): Upheld OBC reservation with a 'creamy layer' exclusion and a 50% ceiling.

The Ram Janmabhoomi movement and the demolition of the Babri Masjid (6 December 1992) led to communal riots and the rise of the BJP as a national alternative.

5. Effects

Deepened democracy by bringing OBCs, Dalits and regional groups into power; strengthened federal bargaining; but also produced instability, defections and policy paralysis at times. The 52nd (1985) and 91st (2003) Amendments addressed defection and the size of ministries.

Practice

UPSC-style (Mains): 'The rise of regional parties has strengthened rather than weakened Indian federalism.' Critically evaluate.

1. Causes of the Crisis

Fiscal imbalance: Large fiscal deficits through the 1980s (around 8% of GDP by 1990–91), financed by borrowing; rising interest burden.

External imbalance: Growing current account deficits, rising short-term external debt and dependence on commercial borrowing and NRI deposits.

Gulf War (1990–91): Oil prices rose sharply and remittances from Indian workers in the Gulf fell.

Political instability: Short-lived governments (1989–91) and the loss of investor confidence; credit rating downgrades and outflow of NRI deposits.

Collapse of the USSR, a major trading partner using rupee trade.

2. The Crisis Point (1991)

Reserves fell to about US$1 billion—barely two to three weeks of imports; India faced the risk of default for the first time.

Gold was used to raise foreign exchange: about 20 tonnes in May 1991, and about 47 tonnes pledged with the Bank of England and the Bank of Japan in July 1991.

3. Stabilisation Measures

Devaluation of the rupee in two steps (1 and 3 July 1991) by about 18–19%; later a market-determined exchange rate (1993).

Fiscal correction in the Budget of 24 July 1991; loans from the IMF and World Bank with structural adjustment conditions.

4. Structural Reforms (LPG)

Liberalisation: The New Industrial Policy (24 July 1991) abolished licensing for all but a short list of industries, reduced industries reserved for the public sector, and removed MRTP restrictions on large firms' expansion.

Globalisation: Automatic approval of FDI up to 51% in priority industries, lower import tariffs, removal of quantitative restrictions, current account convertibility (1994); India joined the WTO (1995).

Privatisation: Disinvestment of shares in public sector enterprises; opening of sectors such as telecom, aviation, banking and insurance.

Financial sector: Narasimham Committee (1991) banking reforms; statutory powers for SEBI (1992); National Stock Exchange; Raja Chelliah Committee on tax reform.

5. Outcomes

Faster GDP growth, rising foreign exchange reserves, a boom in services and IT, more consumer choice and a growing middle class.

Criticism: 'Jobless growth', agrarian distress, rising inequality, regional imbalance and limited gains for the informal sector; reforms were gradual ('reform by stealth').

6. Political Economy

Reforms were carried out by a minority government and continued by later governments of different parties, showing a broad consensus; Manmohan Singh's budget speech quoted Victor Hugo: 'no power on earth can stop an idea whose time has come'.

Practice

UPSC-style (Mains): Was the 1991 crisis the cause of economic reforms or only their trigger? Discuss with reference to the political economy of the 1980s.